5 Excise duty on alcohol and alcoholic
beverages
| (25710)
9983/04
COM(04) 223
| Commission Report on the rates of excise duty applied on alcohol and alcoholic beverages (presented pursuant to Article 8 of Council Directive 92/84/EEC on the approximation of excise duty on alcohol and alcoholic beverages)
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| Legal base | — |
| Document originated | 26 May 2004
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| Deposited in Parliament | 3 June 2004
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| Department | Customs and Excise
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| Basis of consideration | EM of 16 June 2004
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| Previous Committee Report | None
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| To be discussed in Council | Not known
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| Committee's assessment | Politically important
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| Committee's decision | Cleared, but relevant to the debate on general arrangements for excise recommended for European Standing Committee B
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Background
5.1 Directive 92/83/EEC is concerned with harmonisation of the
structure of excise duties on alcohol and alcoholic beverages
and lays down how excise duty should be applied by Member States
to alcoholic drinks. Directive 92/84/EEC is concerned with approximation
of the rates of excise duty for alcohol and alcoholic beverages
in the Community and lays down minimum rates of duty to be applied
in Member States to alcoholic drinks. Under the second Directive
the Commission is required to review the rates of excise duty
periodically. The previous, first, report on this issue was in
September 1995.
The document
5.2 Although Directive 92/84/EEC requires the Commission to report
only on the rates of excise duty, the Commission has decided also
to consider possible changes to the structure of excise duty in
this document, as it feels the structure of taxation is closely
linked to duty rates. In the first part of its report, dealing
with rates of excise duty, the Commission considers four issues:
- the functioning of the internal market. The Commission
notes that there is an incentive for fraud if there is a high
tax burden on products relative to their underlying value and
significant divergences in rates of excise duty between some Member
States. Whilst acknowledging some advantage to consumers of divergent
rates, the Commission says increased approximation would go a
long way towards providing a long-term solution to the internal
market problems. But it notes also differing views among Member
States on how this might be achieved;
- competition between different categories of alcoholic
beverages. The Commission reports that generally the extent to
which different alcoholic beverages compete with each other is
not a decisive factor in determining their rate levels, and that
the demand for a beverage is relatively insensitive to changes
in its own price or to changes in the price of competing types,
although sensitivity increases in higher- taxing Member States;
- the real value of the minimum excise duty rates.
The Commission concludes that a re-valorisation of about 24%
could be considered to reflect the inflation between 1 January 1993
and 31 December 2002. Whilst noting that such a re-valorisation
is required in order to avoid minimum rates becoming meaningless
over time, the rates are minima and Member States are free to
set higher rates; and
- the wider objectives of the Treaty. The Commission
discusses the link between taxation of alcoholic beverages and
health policy and agricultural policy. It notes that a majority
of Member States do not usually take into account health policy
considerations when fixing excise duty rates. On agricultural
policy it says wine taxation — at present there is a zero
minimum rate on wine —remains a very controversial issue.
The Commission also notes that all new Member States undertook
to apply rates at or above the minimum rates on 1 May 2004.
5.3 In the second part of its report the Commission
considers two issues in relation to the structure of excise duties
on alcohol and alcoholic beverages. These are:
- whether to maintain the ability
of Member States to apply different rates of duty to still and
sparkling wine; and
- how best to define and classify various categories
of alcohol and alcoholic beverages for excise purposes. The Commission
discusses particularly the confusion in classification of drinks,
such as alcopops, made up of mixtures of "other fermented
beverages" and spirits.
5.4 In conclusion, the Commission says it has chosen
not to present at present a draft Directive on the basis of the
review. Rather, it intends the report to launch a broad debate,
the outcome of which would enable the Commission to decide whether
to submit any proposals.
The Government's view
5.5 The Paymaster General (Dawn Primarolo) says:
"There are no direct policy implications at
present, as the Commission has not produced a proposal for legislative
change. As a general principle, the Government believes that Member
States should be free to set duty levels according to their national
circumstances and would challenge any proposals which undermined
this, for example on the ending of the differentiation between
still and sparkling wine for excise duty purposes."
Conclusion
5.6 This document discusses important, but sometimes
technically complex, matters. If the debate it is intended to
encourage prompts a legislative proposal from the Commission we
will look to the Government to provide us with a clear and straightforward
guide to the issues then raised.
5.7 Meanwhile we clear this document. But we note
that, in so far as it discusses internal market and fraud issues,
it is relevant to the debate on a Commission Report and draft
Directive on general arrangements for excise which we have recommended
for debate in European Standing Committee B.[21]
21 See (25532) 8241/04: HC 42-xxii (2003-04), para
1 (9 June 2004). Back
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